Crisis, Assumptions and the Effect on the Future of Ticketing: Part 1

Part 1: The Number One Crisis in Ticketing: You Cannot Fake Scarcity

No, that does not mean we have too many seats to sell. It means we have chosen as an industry to not sell them at peak interest time in fear of lost future revenue.

As I have written about before in regards to tickets, whether on the team or event side, FOMO is a major issue within the industry. The fear of missing out on revenue from resale or underpricing has created a snowball effect that for the time being is not slowing down. Purposely not selling season tickets, group tickets or during concert on-sales at better rates leaves many seats available for the public to see.

Data from primary and secondary sites for both concerts and team events show an interest curve based on high volume traffic spikes during the on sale and not again until closer to the event. The interest level becomes low and stagnant between. It is, ironically, during these stagnant times when a majority of the marketing and sales efforts are placed instead of limiting supply early through stronger offerings when interest and activity are high:

This problem is twofold:

  1. It has created too much supply which essentially has trained the customer to wait. Many simply won’t buy after missing the peak emotional time, or they will come back and buy if/when the prices drop.
  2. This has caused an increase in an effort which can be tracked both fiscally (marketing efforts, technology, staffing, and related costs) and subjectively (time is money no matter how you slice it). The result is focusing on financial and personnel efforts that could be pushed elsewhere.

In a nutshell, the industry has created a system that rewards customers for not buying early and punishes the best customers, all while driving up the cost of doing business. Devaluing selling early or in bulk for fear that those tickets could be resold, or even if not, hold a higher potential value ignores that more goes into a higher cost per unit than simply the value at any given time. That value is derived through many data points. The core of which starts with how much supply is currently on the market.

When rights holders attempt to price based off of this perceived value too early, instead of limiting supply, the pricing model is flawed. The same goes for trying to price based off of resale value on distribution channels. Inherently, it is common sense that retail with more customers, better data and increased digital marketing reach can carry a higher cost in general. It also goes without saying that online resale prices fluctuate based on supply as well.

If you are sold out, resale is higher. If you raise prices to match resale and there are cancels, even a small number, this increases supply. The original price modeling is then effectively dead.

The common theme is that there is a shift from actually selling tickets to maximizing revenue. While this can be true from time to time, it does not take into account the entire picture including long term health, ancillary revenue, or if revenue was “actually” maximized.

Take the playoffs for example. If a few games generate higher dollar but fewer sales, does that actually mean revenue was maximized?

The less supply you have, the higher the price of the remaining tickets will be worth. You could have sold out and actually equaled or generated more revenue. How did you do in previous games or rounds — did you sell less? Did anyone not renew season tickets based on the inability to offset costs? How much effort (cost) was put into selling earlier games? How much ancillary revenue such as concessions was lost?

The problem is that this is not limited to a known industry issue. It is quickly becoming a public perception. A small data point but an interesting antidote nonetheless. A good friend of mine, Trent Sisson, is a Vice President at Mountaingate Capital, a private equity firm in Denver and goes to many events each year. He asked me this question while we were juggling the chaos of our toddler’s playdate when daycare was closed one day: “You would know better than me, but in any industry, they try to sell quickly. When buying tickets they seem to do the opposite. Don’t people just not buy, or forget, or pay a lot less later? It makes no sense to me”.

Sometimes, beyond all of the experiences, data points and rhetoric a noticeable problem can be summed up with a simple question even in the middle of chaos. Does what we are doing make sense?

Read Part 2 Here: Crisis in Ticket Sales

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Mike Guiffre, SVP of Business Development for SuiteHop

For more articles and media visit www.michaelguiffre.com